F 2014 Q#19
for part b, shouldnt we also include investment income earned in CY 2011? i.e. average (0,218000)*yield ?
It looks like you're new here. If you want to get involved, click one of these buttons!
for part b, shouldnt we also include investment income earned in CY 2011? i.e. average (0,218000)*yield ?
Comments
No, you don't need to include that, but this is a common question on this type of problem.
For excess(deficiency) problems, you don't include investment income for the first CY in the calculation. The reason is that here we're calculating the excess(deficiency) using the APV value for 2011 at 12 months as the basis. Whether the APV value of 218,000 is high or low on Dec 31, 2011 doesn't have anything to do with investment income earned prior to that during 2011. All we need to know is the investment income earned subsequent to Dec 31, 2018.
The situation would be different however if you were asked to calculate total investment income attributable to unpaid amounts from AY 2011. In that case you would include investment income from all CYs.